Question

Oriole Corporation reported $203000 in revenues in its 2021 financial statements, of which $69000 will not be included in the tax return until 2022. The enacted tax rate is 30% for 2021 and 25% for 2022. What amount should Oriole report for deferred income tax liability in its balance sheet at December 31, 2021

Answer 1

Answer: $17,250

Explanation:

Income Tax Liability is an amount that the company 'owes' the tax man because they did not pay tax on some earnings in a certain year mainly due to differences in Accounting methods.

That means that $69,000 is the tax figure to be focused on as it is the figure that the Income tax liability will be calculated from.

$69,000 is not to be taxed this year but will be paid tax on in 2022.

The tax rate for 2022 is 25%.

The Tax in 2022 is therefore,

= 25% * 69,000

= $17,250

$17,250 is therefore the amount that Oriole Corporation should record as deferred income tax liability in its balance sheet at December 31, 2021.